I am a little confused about what the UTD financial office is saying regarding the national merit scholarship that my D received last year. UTD says that I have to factor in the money that my D kept ($4400) because she commutes to school, NOT the tuition money that was directly paid to the bursar’s office. I use Turbotax to do my taxes and they have not been clear on how much is deductible if we claim her as a dependent. Anybody in the same situation that can clarify the situation? This is the first time doing it and I have just put in the $4400 in our returns. Just want to make sure that we are doing it right.
No, the scholarship belongs to your daughter and she needs to file her own tax return. It does NOT go on your taxes. You can still claim her as a dependent but she does her own tax from and it will ask her if anyone else can claim her and she responds ‘yes’.
Take the entire scholarship received and then deduct the amount paid for tuition, qualified fees, and books. The remainder is taxable (to her) scholarship. If she uses TurboTax, it will walk her through it. If will ask for the information off form 1098-T, which may be correct or may be incorrect - you have to confirm is the school kept all information in the 2018 tax year. You also have to put in the amount she spent on books.
If she had other income from a job, you will of course put this into TurboTax too.
If all she had was $4400 in excess scholarship money, her standard deduction will cover it and she will not owe any taxes for 2018. All numbers will be doubled for 2019 (2 semesters).
I second what @twoinanddone said. You can put the 1098-T info in your tax returns to see if you qualify for the education credit if you want. But since she’s receiving more than just tuition, fees, and books, I can guarantee you won’t qualify for it.
Your daughter needs to report that amount on her taxes. The reporting for it changed this year with the TCJA and I would not recommend doing it on your own without some type of tax software (such as TaxCut). Also realize that the reporting may affect state and local taxes. The amount of my daughter’s room & board that was paid by her scholarship ended up on line 1 of her 1040 (with a notation as to what schedule it was from), which would have subjected it to our local municipality tax. (Last year it was reported elsewhere on the form.) I was able to go down to the local government office with documentation that this was scholarship money and get them to adjust her taxes accordingly. It was the first time they’d ever had to deal with that.
Other than the way that kiddie tax (if applicable) is calculated, how did the reporting of taxable scholarships change for 2018? The line numbers have changed, but for both 2017 and 2018, the amount of taxable scholarships is reported on the return line for “wages, salaries, tips, etc.” And what schedule would the taxable scholarship amount have come from in 2018, before it was reported on 1040 line 1?
Thanks a lot folks, wonderful answers! I did not check the answers here until now, but did some taxes last nite and it told me that I could not get the credit
You can get the AOTC if she declares more of the tuition and fees (QEE) as taxable. If $4400 is all her income for the year, she has a lot of room under the standard deduction to ‘shift’ the amount she received in non-taxable scholarships to taxable.
Thanks twoinanddone, appreciate your help! UTD does not report the tuition paid on the 1098-T. Therefore her income as stated on the form is a non-earned scholarship that is $4400. I used that number and as you rightfully pointed out, she owes nothing and still claimed as a dependent under ours.
UTD is required to a 1098-T if you or the student might get a tax credit, so only if the tuition/fees exceeds the scholarship, which it probably didn’t in your case. However, you can still do you own tax accounting. Also, check the student portal for the 1098-T. Both schools my kids went to put them on their pages even though they didn’t send them to me after the first year.
I received 10 1098-T’s over the years for 2 kids in college. They were never correct because I kept all the scholarships in the tax year so I kept my own records. This year there was a change to how the colleges report billing in Dec for the spring, so finally the final 1098=T received was correct!
Sounds like the student had a full ride, and after all tuition, fees, room and board was paid to the university, the student received a refund for other nonqualified expenses like personal expenses, travel, etc.
You need to add up all scholarships received in 2018, subtract tuition, fees and book expenses. That is the taxable amount.
It is probably much higher than the $4,400. Because room and board covered by scholarship would be taxable as well.
It sounds like the room and board paid by the scholarship was the $4400.
Even after you add up all the tuition, books, fees, etc, and subtract them from the scholarship, and you get $4400, you CAN declare more of the scholarship taxable and then get more of an AOTC for the parents. In prior years, the standard deduction was only $6k so declaring more of the scholarship taxable would make the child’s taxes higher (including any state taxes). However, now the standard deduction is $12k so it is easier to shift that non-taxable amount to taxable and the parent can claim the AOTC.
But here it is tax day and this might be too late.
Thanks Twoinanddone. Will keep your analysis in mind for the next tax year (this year). I got in a little late this year with the understanding that I might be just able to put her scholarship into ours and move on. However, she did have to file on her own with the 1098-t. Your analysis gives me ideas that I can explore for next tax year. Thank you for your time and help. Truly appreciated!
@iAmACynic - you got great advice from @twoinanddone . Even though it is past the tax filing deadline, it is of course possible for both you and your child to both file an amended return for 2018.
For the student claimed as a dependent, if they declare more of the scholarship as taxable, they may have to file federal taxes on it. But if the student was adding $4000 as taxable scholarship income, it probably means a $400 additional tax liability.
However, if that means the parents can now claim the $2500 AOTC, it is well worth doing.
In this case, if the student only had the $4400 in scholarships (room and board I’m assuming), and no other income or at least less than $4000 in other income, she can easily add ~$4000 more without exceeding the standard deduction, thus getting the parents the AOTC of $2500 (if they had at least $2500 in tax liability this year). There could be state tax owed on the scholarship depending on the state.
I’d look into it as you can take the AOTC for 4 years, and in the following tax years, when the student is in college for 2 semesters so has double the taxable scholarship amounts, $8800, and has a summer job, there might not be room to ‘shift’ the taxable scholarship without exceeding the standard deduction and thus it would be taxable under the kiddie tax rates.
@PurpleTitan that’s what I thought…this tax stuff is freaking me out. As if I was not freaking out before this for trying to figure out how I am going to pay for school ?
